I just tried (and rejected) this system. A couple of caveats - it could have worked in the right setup, I think.
1 - my HDTV is a 2-year old Panasonic 42" 720p plasma. Not the ideal monitor, as the resolution is lower than ideal. If you're buying 1080p, you'll do better. Also, my monitor didn't have a PC input so I was going DVI-to-HDMI, which worked, but I think other monitors are set up to support this better than mine was.
2 - I was working from my couch. Not as comfy as I had hoped, even with a laptop thingie to rest my keyboard on. If you can set up a real working desk it will work better.
3 - As Blackrat points out, get the good keyboard mouse combo, ideally bluetooth. Regular wireless works fine for the keyboard, but wireless mice only transmit out to about 6 ft. Bluetooth mice go to 30 ft. I have a nice Logitech keyboard/mouse combo, but the mouse didn't work terribly well, and my couch was right at the 5-6 ft mark, so the transmission could be spotty.
After two months of that, I sprung for a regular monitor. I think it CAN work, though, with the right gear.